Processing of the dengue virus pre-matrix (pM) protein was studied during cell-free translation of RNA transcripts prepared from cloned dengue DNA containing capsid, pM, and NH2-terminal envelope glycoprotein (E) sequences. To elucidate the mechanism for processing, strategic mutations were produced in capsid and pM sequences were produced by site-directed mutagenesis of dengue DNA, and mutant RNA transcripts were then translated. Our recent observations suggest that cleavage at the capsid-pM and pM-E sites is mediated by signal peptidase. A signal-like function appears to mediate the translocation event and is linked to cleavage. It is proposed that this function is served by a hydrophobic segment (amino acid residues 100-113 in the dengue precursor) that occurs at the capsid-pM junction. Recognition of the "signal" does not require prior cleavage of NH2-terminal capsid sequences. Our data also suggest that the "signal" has a polar effect on translocation of E, and possibly nonstructural glycoprotein, NS1, sequences.